LOUISVILLE, Ky.--(BUSINESS WIRE)--Brown-Forman Corporation (NYSE:BFA) (NYSE:BFB) reported financial
results for its fourth quarter and fiscal year ended April 30, 2017. For
the fourth quarter, the company’s reported net sales1 declined
5% to $694 million (+4% on an underlying basis2). Reported
operating income declined 71% in the fourth quarter to $212 million
(+13% on an underlying basis). Diluted earnings per share decreased 71%
to $0.37 compared to the prior-year period (-5% excluding acquisition
and divestiture impact3).

For the full year, reported net sales decreased 3% to $2,994 million
(+3% on an underlying basis) as foreign exchange, A&D activity and
inventory changes negatively impacted reported net sales growth by six
points. Reported operating income declined 35% to $989 million (+7% on
an underlying basis), and diluted earnings per share decreased 34% to
$1.71 (+5% excluding acquisition and divestiture impact3).

Paul Varga, the company's Chief Executive Officer, said, “Fiscal 2017
was another year of strong underlying growth and excellent progress in
positioning Brown-Forman for continued gains in the years ahead. This
year’s results translate into the tenth straight year of growth in
underlying net sales and operating income, with fiscal 2017’s underlying
operating income growth of 7% approximating the 10-year average of 8%.”
Varga added, “Given the acceleration we experienced in the second half
of the year, the investments we continue to make behind the business,
and the expectation of improved contribution from innovation next year,
we are forecasting another strong year in fiscal 2018, with mid-single
digit underlying net sales growth and operating expense leverage driving
6-8% growth in underlying operating income.”

Fiscal 2017 Highlights

Underlying net sales increased 3%, and improved from 2% in the first
half to 4% in the second half:

Underlying operating income increased 7%, helped by a 2% decline in
underlying SG&A

Returned $835 million to shareholders in the year and $4.3 billion
since fiscal 2013

Generated a 33% operating margin, an ROIC5 of 19% and a
ten-year TSR6 of 14%, double the S&P 500

Fiscal 2017 Performance By Market - Balanced
Growth and a Recovery in the Emerging Markets

The company delivered another solid year of growth in developed markets,
while the second half results in the emerging markets improved
significantly. Each of our top ten largest markets grew underlying net
sales in the year. Underlying net sales grew 4% (-3% reported) in the
United States, 4% (-3% reported) in developed markets outside of the
United States, 4% (-7% reported) in the emerging markets, and 7% (3%
reported) in Travel Retail.

Brown-Forman Corporation - Top Ten Countries

Supplemental Information (Unaudited)

Twelve Months Ended April 30, 2017

Country

% of

Reported Net Sales

% Growth in

Reported Net Sales

% Growth inUnderlying Net Sales

United States

48%

(3)%

4%

United Kingdom

7%

(12)%

5%

Australia

5%

(2)%

2%

Mexico

5%

—%

15%

Germany

4%

(1)%

6%

France

4%

5%

10%

Poland

2%

5%

9%

Japan

1%

30%

18%

Canada

1%

(8)%

1%

Russia

1%

(43)%

7%

Top Ten Total

79%

(3)%

5%

Other Markets

21%

(2)%

(3)%

Total Worldwide

100%

(3)%

3%

Note: Reported net sales growth excludes excise taxes but includes
the impact from changes in foreign exchange and inventories

Totals may differ due to rounding.

Sales growth in the United States was powered by broad-based gains
across the Jack Daniel's family of brands. Jack Daniel's Tennessee
Whiskey continued to grow through a combination of volume gains and
pricing. Jack Daniel's Tennessee Honey also grew sales while Jack
Daniel's Tennessee Fire was nearly flat, as strong growth in the
on-premise offset challenging off-premise comparisons associated with
the prior year's launch. In addition to growing Gentleman Jack's
underlying net sales by mid-single digits in the United States, the
company maintained solid double-digit growth for its bourbon brands
including Woodford Reserve and Old Forester. The company's tequila
brands, Herradura and el Jimador, grew underlying net sales by double
digits in the United States.

The developed markets outside of the United States delivered another
year of solid results in fiscal 2017, with underlying net sales growth
of 4% (-3% reported). Western Europe's underlying net sales grew
mid-single digits, as the United Kingdom, Germany and France delivered
strong results. Large price increases in Japan helped underlying net
sales jump 18%, while underlying net sales in Canada and Australia grew
slightly.

The emerging markets experienced a significant improvement in the year,
with second half underlying net sales growth of 8% (-1% reported)
compared to the first half's 1% decline (-13% reported). For the full
year, underlying net sales grew in-line with the developed markets, up
4% (-7% reported). Growth was particularly strong in top markets such as
Mexico and Poland. Turkey and Brazil both declined in the year as
economic weakness weighed heavily on results, while Russia and India
returned to growth and Ukraine delivered another year of double-digit
gains.

Travel Retail’s underlying net sales increased 7% (+3% reported),
primarily attributable to distribution gains for Woodford Reserve,
improved business with the airlines, as well as strengthening trends in
European and Russian travel.

The company’s non-branded business, primarily comprised of used barrel
sales, experienced an 18% year-to-date decline in net sales excluding
the impact from acquisition and divestiture activity (+11% reported).
The reduction in net sales was due largely to declines in used barrel
sales reflecting lower prices and volumes.

The company’s underlying net sales growth was led by the Jack Daniel’s
family, up 3% (flat reported). Jack Daniel's family of brands continued
to grow globally, surpassing 16.1 million equivalent adjusted7
cases as we celebrated the brand's 150th anniversary. This includes
depleting 12.5 million cases of Jack Daniel's Tennessee Whiskey. While
depletions for Jack Daniel's Tennessee Whiskey were flat in the first
half of the year, the second half grew 2%, helped by improving trends in
the emerging markets. The family's other brands, including Tennessee
Honey, Gentleman Jack, and Tennessee Fire, to name a few, depleted 2.9
million cases, while RTDs had a very strong year, depleting 8.0 million
cases (800,000 equivalent cases).

The company continues to grow and develop the Jack Daniel's family of
brands and believes that the opportunity for additional growth and share
gains remains robust. Jack Daniel's Tennessee Whiskey grew underlying
net sales by 3% (-1% reported) as sluggish trends early in the year
steadily improved, including 5% underlying net sales growth in the
fourth quarter (-3% reported). Jack Daniel’s Tennessee Honey grew
underlying sales by 4% in its seventh year in the market (3% reported)
and Jack Daniel’s Tennessee Fire grew underlying net sales in the
mid-teens, with nearly flat results in the United States offset by
strong distribution gains in many markets outside of the United States.
Gentleman Jack grew underlying net sales mid-single digits globally.
Jack Daniel’s RTD/RTP business grew underlying net sales by 6% (3%
reported), helped by innovation such as American Serve in Australia.

Finlandia vodka experienced a 1% decline in underlying net sales (-10%
reported) as results in many markets continued to improve from the prior
year. The competitive landscape for premium vodka in Poland and Russia
remains very challenging.

El Jimador grew underlying net sales by 8% (flat reported), with
double-digit gains in the United States and flat results in Mexico
despite another year of price increases as the company repositions the
brand at a higher price point. New Mix surpassed six million cases in
the year and grew underlying net sales by 17% (+2% reported), helped by
a strong economy and consumer demand for new sizes. Herradura grew
underlying net sales by 14% (9% reported) as the Silver and Ultra
expressions enjoy continued gains in the marketplace.

Chambord and Korbel grew underlying net sales by low-single digits,
while Sonoma-Cutrer grew underlying net sales by mid-single digits.
Early Times and Canadian Mist continued to experience declines as the
competitive environment for mainstream brands has intensified.

Other P&L Items

In fiscal 2017, price/mix and volume contributed equally to underlying
net sales growth. Underlying A&P spend increased by 2% during the year
(-8% reported). Underlying SG&A decreased by 2% during the year (-3%
reported). The company remains focused on tightly controlling SG&A to
drive better efficiency and focus, but will continue to pursue growth
opportunities such as our current route to market investments in Spain
and start-up costs associated with the Old Forester and Slane
distilleries and homeplaces.

Financial Stewardship

As of April 30, 2017, total debt was $2,149 million, up from $1,501
million as of April 30, 2016. The increase is primarily related to the
issuance of two bonds in June of 2016, including €300M 1.2% 10-year
notes and £300M 2.6% 12-year notes. On June 1, 2016, the company closed
on the acquisition of the GlenDronach, BenRiach, and Glenglassaugh
single malt scotch brands for aggregate consideration of $407 million.

On May 24, 2017, Brown-Forman's board declared a regular quarterly cash
dividend of $0.1825 per share on its Class A and Class B common stock.
The cash dividend is payable on July 3, 2017 to stockholders of record
on June 5, 2017. Brown-Forman has paid regular quarterly cash dividends
for 71 consecutive years and has increased the dividend for 33
consecutive years. In fiscal 2017, the company also repurchased a total
of 11.9 million Class A and Class B shares for $561 million at an
average price of $47 per share. When combined with the $274 million of
cash dividends paid, the company returned $835 million to shareholders
during the fiscal year and has returned $4.3 billion since fiscal 2013.

In fiscal 2017, the company delivered a top-tier operating margin of
33%, an ROIC of 19% and a ten year TSR that compounded at 14% per year,
well ahead of the competitive set and double the TSR of the S&P 500
Index over the same period.

Fiscal Year 2018 Outlook

The global economy remains volatile, particularly in the emerging
markets, and the competitive landscape has intensified in the developed
world, making it difficult to predict future results. Assuming no
deterioration in current trends, the company anticipates:

Underlying net sales growth of 4% to 5%, led by the Jack Daniel's
family of brands, our premium bourbon and tequila brands, and helped
by new products such as the launch of Jack Daniel's Tennessee Rye and
Slane Irish Whiskey, as well as seeding of our single malt scotch
brands.

Underlying operating income growth of 6% to 8%.

Diluted earnings per share of $1.80 to $1.90, which includes a modest
negative impact from a higher tax rate, foreign exchange headwinds and
setting up owned distribution in Spain.

Furthermore, the company is targeting three year cost savings of $100
million (FY18-FY20) through better leveraging prior investments,
including production capabilities, route to market initiatives, brand
innovation, homeplace assets, and our people.

Conference Call Details

Brown-Forman will host a conference call to discuss the results at 10:00
a.m. (EDT) today. All interested parties in the United States are
invited to join the conference call by dialing 888-624-9285 and asking
for the Brown-Forman call. International callers should dial
+1-706-679-3410. The company suggests that participants dial in ten
minutes in advance of the 10:00 a.m. (EDT) start of the conference call.
A live audio broadcast of the conference call, and the accompanying
presentation slides, will also be available via Brown-Forman’s Internet
website, http://www.brown-forman.com/,
through a link to “Investors/Events & Presentations.” A digital audio
recording of the conference call will also be available on the website
two hours after the conclusion of the conference call. The replay will
be available for at least 30 days following the conference call.

Footnotes:1
Percentage growth rates are compared to prior-year periods, unless
otherwise noted.2 We present changes in certain income
statement line-items that are adjusted to an “underlying” basis, which
we believe assists in understanding both our performance from period to
period on a consistent basis and the trends of our business. Non-GAAP
“underlying” measures include changes in (a) underlying net sales, (b)
underlying gross profit, (c) underlying advertising expenses, (d)
underlying selling, general and administrative expenses and (e)
underlying operating income. A reconciliation of these non-GAAP measures
for the three-month and twelve-month periods ended April 30, 2017, to
the most closely comparable GAAP measure, and the reasons why management
believes these adjustments to be useful, are included in Schedule A and
B in this press release.3 We present a reconciliation
of diluted EPS (GAAP) to “Adjusted diluted EPS (Non-GAAP)” for the
three-month and twelve-month periods ended April 30, 2017, and the
reason why management believes this measure to be useful, in Schedule C
in this press release.4 Super/Ultra-premium whiskey
brands include the Woodford Reserve family, Jack Daniel’s Single Barrel,
Gentleman Jack, Sinatra Select, No. 27 Gold, and Collingwood.5
ROIC: Return on invested capital is the sum of net income and after-tax
interest expense, divided by average invested capital (equals assets
less liabilities, excluding interest-bearing debt).6
TSR: Total Shareholder Return is shown as a compound annual growth rate
assuming dividends reinvested, and is measured over the ten-year period
ending April 30, 2017.7 Equivalent conversion
depletions represent the conversion of ready-to-drink (RTD) and
ready-to-pour (RTP) brands to a similar drinks equivalent as the parent
brand for various trademark families. RTD volumes are divided by 10,
while RTP volumes are divided by 5.

This press release contains statements, estimates, and projections that
are “forward-looking statements” as defined under U.S. federal
securities laws. Words such as “aim,” “anticipate,” “aspire,” “believe,”
“continue,” “could,” “envision,” “estimate,” “expect,” “expectation,”
“intend,” “may,” “plan,” “potential,” “project,” “pursue,” “see,”
“seek,” “should,” “will,” and similar words identify forward-looking
statements, which speak only as of the date we make them. Except as
required by law, we do not intend to update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise. By their nature, forward-looking statements
involve risks, uncertainties and other factors (many beyond our control)
that could cause our actual results to differ materially from our
historical experience or from our current expectations or projections.
These risks and uncertainties include, but are not limited to:

Risks associated with being a U.S.-based company with global
operations, including commercial, political and financial risks; local
labor policies and conditions; protectionist trade policies or
economic or trade sanctions; compliance with local trade practices and
other regulations, including anti-corruption laws; terrorism; and
health pandemics

Our status as a family “controlled company” under New York Stock
Exchange rules

For further information on these and other risks, please refer to the
“Risk Factors” section of our annual report on Form 10-K and quarterly
reports on Form 10-Q filed with the SEC.

Use of Non-GAAP Financial Information: This press release
includes measures not derived in accordance with U.S. generally accepted
accounting principles (“GAAP”), including return on invested capital,
underlying net sales, underlying gross profit, underlying advertising
expense, underlying SG&A, and underlying operating income. These
measures should not be considered in isolation or as a substitute for
any measure derived in accordance with GAAP, and also may be
inconsistent with similar measures presented by other companies.
Reconciliations of the underlying measures to the most closely
comparable GAAP measures, and reasons for the company’s use of these
measures, are presented on Schedules A and B attached hereto.

Brown-Forman CorporationUnaudited Consolidated
Statements of OperationsFor the Three Months Ended April 30,
2016 and 2017(Dollars in millions, except per share amounts)

2016

2017

Change

Sales

$

933

$

887

(5

%)

Excise taxes

204

193

(6

%)

Net sales

729

694

(5

%)

Cost of sales

216

214

(1

%)

Gross profit

513

480

(6

%)

Advertising expenses

101

91

(9

%)

Selling, general, and administrative expenses

181

179

(1

%)

Gain on sale of business

(485

)

—

Other expense (income), net

(10

)

(2

)

Operating income

726

212

(71

%)

Interest expense, net

11

15

Income before income taxes

715

197

(72

%)

Income taxes

193

53

Net income

$

522

$

144

(72

%)

Earnings per share:

Basic

$

1.31

$

0.38

(71

%)

Diluted

$

1.30

$

0.37

(71

%)

Gross margin

70.3

%

69.1

%

Operating margin

99.5

%

30.5

%

Effective tax rate

27.0

%

26.9

%

Cash dividends paid per common share

$

0.1700

$

0.1825

Shares (in thousands) used in the calculation of earnings per share

Basic

398,657

383,760

Diluted

401,012

386,339

Brown-Forman CorporationUnaudited Consolidated
Statements of OperationsFor the Years Ended April 30, 2016
and 2017(Dollars in millions, except per share amounts)

Brown-Forman CorporationUnaudited Condensed
Consolidated Statements of Cash FlowsFor the Years Ended
April 30, 2016 and 2017(Dollars in millions)

2016

2017

Cash provided by operating activities

$

524

$

639

Cash flows from investing activities:

Proceeds from sale of business

543

—

Acquisition of business

—

(307

)

Additions to property, plant, and equipment

(108

)

(112

)

Other

(2

)

(3

)

Cash provided by (used for) investing activities

433

(422

)

Cash flows from financing activities:

Net increase in short-term borrowings

80

(122

)

Repayment of long-term debt

(250

)

—

Proceeds from long-term debt

490

717

Debt issuance costs

(5

)

(5

)

Acquisition of treasury stock

(1,107

)

(561

)

Dividends paid

(266

)

(274

)

Other

(2

)

(40

)

Cash used for financing activities

(1,060

)

(285

)

Effect of exchange rate changes on cash and cash equivalents

(4

)

(13

)

Net decrease in cash and cash equivalents

(107

)

(81

)

Cash and cash equivalents, beginning of period

370

263

Cash and cash equivalents, end of period

$

263

$

182

Schedule A

Brown-Forman Corporation

Supplemental Information (Unaudited)

Three Months Ended

Twelve Months Ended

Fiscal Year Ended

April 30, 2017

April 30, 2017

April 30, 2016

Reported change in net sales

(5

)%

(3

)%

(1

)%

Impact of foreign currencies

3

%

2

%

5

%

Acquisitions and divestitures

2

%

3

%

1

%

Estimated net change in distributor inventories

4

%

1

%

—

%

Underlying change in net sales

4

%

3

%

5

%

Reported change in gross profit

(6

)%

(6

)%

(2

)%

Impact of foreign currencies

4

%

3

%

6

%

Acquisitions and divestitures

2

%

4

%

1

%

Estimated net change in distributor inventories

4

%

1

%

—

%

Underlying change in gross profit

4

%

3

%

5

%

Reported change in advertising

(9

)%

(8

)%

(4

)%

Acquisitions and divestitures

1

%

8

%

2

%

Impact of foreign currencies

1

%

2

%

5

%

Underlying change in advertising

(7

)%

2

%

2

%

Reported change in SG&A

(1

)%

(3

)%

(1

)%

Impact of foreign currencies

1

%

1

%

4

%

Acquisitions and divestitures

1

%

—

%

—

%

Underlying change in SG&A

1

%

(2

)%

2

%

Reported change in operating income

(71

)%

(35

)%

49

%

Estimated net change in distributor inventories

10

%

3

%

1

%

Impact of foreign currencies

12

%

4

%

4

%

Acquisitions and divestitures

61

%

35

%

(46

)%

Underlying change in operating income

13

%

7

%

8

%

Note: Totals may differ due to rounding

Notes:

We use certain financial measures in this report that are not
measures of financial performance under GAAP. These non-GAAP
measures, which are defined below, should be viewed as supplements
to (not substitutes for) our results of operations and other
measures reported under GAAP. The non-GAAP measures we use in this
report may not be defined and calculated by other companies in the
same manner.

We present changes in certain income statement line-items that are
adjusted to an “underlying” basis, which we believe assists in
understanding both our performance from period to period on a
consistent basis, and the trends of our business. Non-GAAP
“underlying” measures include changes in (a) underlying net sales,
(b) underlying cost of sales, (c) underlying excise taxes, (d)
underlying gross profit, (e) underlying advertising expenses, (f)
underlying selling, general, and administrative (SG&A) expenses,
and (g) underlying operating income. To calculate each of these
measures, we adjust, as applicable, for (a) foreign currency
exchange; (b) estimated net changes in distributor inventories;
and (c) the impact of acquisition and divestiture activity. We
explain these adjustments below.

“Foreign exchange.” We calculate the percentage change in our
income statement line-items in accordance with GAAP and adjust
to exclude the cost or benefit of currency fluctuations.
Adjusting for foreign exchange allows us to understand our
business on a constant dollar basis, as fluctuations in exchange
rates can distort the underlying trend both positively and
negatively. (In this report, “dollar” always means the U.S.
dollar unless stated otherwise.) To eliminate the effect of
foreign exchange fluctuations when comparing across periods, we
translate current year results at prior-year rates.

“Estimated net change in distributor inventories.” This measure
refers to the estimated net effect of changes in distributor
inventories on changes in our measures. For each period being
compared, we estimate the effect of distributor inventory
changes on our results using depletion information provided to
us by our distributors. We believe that this adjustment reduces
the effect of varying levels of distributor inventories on
changes in our measures and allows us to understand better our
underlying results and trends.

“Acquisitions and divestitures.” On January 14, 2016, we
announced that we had reached an agreement to sell our Southern
Comfort and Tuaca brands and related assets to Sazerac Company,
Inc. The transaction closed March 1, 2016 for approximately $543
million in cash (subject to a post-closing inventory
adjustment), which resulted in an estimated one-time operating
income gain of approximately $485 million in the fourth quarter
of fiscal 2016. This adjustment removes (a) the gain on sale,
(b) transaction-related costs, and (c) operating activity for
the period that is not comparable in calculating our underlying
growth. On April 27, 2016, we announced that we had reached an
agreement to purchase The BenRiach Distillery Company Limited.
The purchase closed on June 1, 2016 for approximately £281
million ($408 million USD as of June 1, 2016). Prior to the
purchase of BenRiach, we incurred transaction related costs in
fiscal 2016, which are removed from our results. We believe that
these adjustments allow us to understand better our underlying
results on a comparable basis.

Management uses “underlying” measures of performance to assist it
in comparing and measuring our performance from period to period
on a consistent basis, and in comparing our performance to that of
our competitors. We also use underlying measures in connection
with management incentive compensation calculations. Management
also uses underlying measures in its planning and forecasting and
in communications with the board of directors, stockholders,
analysts, and investors concerning our financial performance. We
have provided reconciliations of the non-GAAP measures adjusted to
an “underlying” basis to their nearest GAAP measures in the tables
below under “Results of Operations – Year-Over-Year Comparisons”
and have consistently applied the adjustments within our
reconciliations in arriving at each non-GAAP measure.

1 Depletions are shipments direct to retail or from
distributors to wholesale and retail customers, and are commonly
regarded in the industry as an approximate measure of consumer
demand.

2 Net sales is a shipment based metric; shipments and
depletions can be different due to timing. Please see the Notes to
Schedule A in this press release for additional information on the
impact of foreign currencies and estimated net change in
distributor inventories and the reasons why we believe that the
presentation of these non-GAAP financial measures provides useful
information to investors.

3 Equivalent conversion depletions represent the
conversion of ready-to-drink (RTD) and ready-to-pour (RTP) brands
to a similar drinks equivalent as the parent brand for various
trademark families. RTD volumes are divided by 10, while RTP
volumes are divided by 5.

9 Reported net sales for Brown-Forman Corporation were
negatively impacted by 3% due to the divestiture of Southern
Comfort and Tuaca and the acquisition of the BenRiach Distillery.
These effects should be considered when calculating net sales.
Please see the Notes to Schedule A in this press release for
additional information on the impact of acquisitions and
divestitures and the reasons why we believe that the presentation
of these non-GAAP financial measures provides useful information
to investors.

Schedule C

Brown-Forman Corporation

Supplemental Worldwide Brand Information (Unaudited)

Three and Twelve Months Ended April 30, 2017

4th Quarter EPS

Fiscal Year EPS

2016

2017

2016

2017

Diluted EPS (GAAP)

$1.30

$0.37

$2.61

$1.71

Year-over-year growth

(71)%

(34)%

Sale of Southern Comfort & Tuaca

$(0.89)

$(0.88)

Earnings contribution from acquired & divested brands

$(0.01)

$0.01

$(0.10)

$0.01

Adjusted diluted EPS (Non-GAAP)1

$0.40

$0.38

$1.63

$1.72

Year-over-year growth

(5)%

5%

1 “Adjusted diluted EPS.” We use a
non-GAAP measure for diluted earnings per share to identify the
effect of acquisitions and divestitures on diluted earnings per
share; we isolate this effect because it is expected not to be
part of our sustainable results or trends.

On March 1, 2016, we sold the Southern Comfort and Tuaca brands
and related assets to Sazerac Company, Inc. for $543 million in
cash, which resulted in a gain of $485 million in the fourth
quarter of fiscal 2016. On June 1, 2016, we acquired The BenRiach
Distillery Company Limited (BenRiach) for aggregate consideration
of $407 million. The acquisition, which brought three single malt
Scotch whisky brands into our portfolio, included brand
trademarks, inventories, three malt distilleries, a bottling
plant, and BenRiach’s headquarters in Edinburgh, Scotland.

“Adjusted diluted EPS” removes (a) the gain on the sale of
Southern Comfort and Tuaca, (b) those transaction-related costs
not included in the gain on the sale of Southern Comfort and
Tuaca, (c) transaction and financing-related costs for the
acquisition of BenRiach, and (d) operating activity for the
acquired and divested businesses in the non-comparable periods.
(With respect to the comparison of fiscal 2017 to fiscal 2016, the
non-comparable period comprised all months of both years). Tax
effects on all adjustments are calculated consistent with the
nature of the underlying transactions.